Manufacturing shrinks in November

Australian manufacturing continued to shrink due to slow sales, skills shortages and other tough conditions, a survey shows.

The Australian Industry Group/PriceWaterhouseCoopers Australian Performance of Manufacturing Index (PMI) rose just 0.4 points in November to 47.8 - keeping it below the 50 points level, which means it is still contracting rather than expanding.

Eight of the twelve industry subsectors recorded activity declines, with construction materials, clothing and footwear falling the most.

Expansion was greatest for the miscellaneous manufactures and transport equipment sub-sectors during November.

There was growth of 1.2 points (to 48.1) in the new orders sub-index, while the employment sub-index dropped sharply in November to 45.3 points, with only one month of expansion over the past year.

Australian Industry Group chief executive, Heather Ridout said there was a need to address industry softening.

"Manufacturing conditions clearly remain tough and have been so for much of the past year, raising critical issues for policy-makers and businesses alike," she said.

"While the Australian PMI shows an easing in the pace of decline in current activity and new orders, employment levels fell sharply in November suggesting an ongoing loss of manufacturing capability.

"This highlights the importance of the Federal Government's manufacturing taskforce in developing a longterm strategy for the industry."

But there were some positive signs from other data, Ms Ridout said.

"At the same time, it is encouraging that the just released ABS (Australian Bureau of Statistics) capital expenditure data indicates a solid upturn in manufacturing investment suggesting that underneath the data there is a strong vein of confidence in the prospects for the industry."